Yet another (one of the very few remaining) voice of reason calls it quits after 30 years of writing The Privateer, one of the best financial newsletters. At this rate there will be virtually nobody left to challenge the daily propaganda spew coming out of the mainstream farcism. As Bill says, "We have been analysing the idiocies and imbecilities of the financial and political "powers that be" for a long time. And for an equivalent time, we have been watching the "markets" succumb to this detritus. That process was completed with the global near death financial experience of late 2008 but it had been building up since long before we began to chronicle it in 1984.... we need a break." Sadly, expect the amount of idiocies and imbecilities to rise exponentially in the near future as the insolvency of the dying status quo regime is exposed for everyone - not just rich Cypriot depositors - to see. As for Bill: enjoy the break, you have earned it.
For many decades, the IT sector was the goose that laid the golden eggs of US fixed investment, with CapEx spending on IT rising as a percentage of GDP every year since 1954: after all spending on improving overall efficiency and productivity seemed like the ultimate and best CapEx investment (at least before Bernanke's ZIRP came along and made dividends and stock buybacks the only excess cash allocation option), where compounded CapEx investments would generate returns orders of magnitude higher than the allocated capital. Or so the thinking went until the Internet boom. As can be seen on the chart below, the advent of the "next big thing" in IT (sorry, not iPhones) - Cloud Computing - may well have been the next step function in IT investments, but due to the decentralized nature of the high-capacity broadband and high levels of utilization, may represent the first time in the past 60 years of US economic history, where incremental investments in the Cloud will no longer be GDP "accretive". This can be seen be the lower CapEx spend on cloud in the past decade (2.9%) compared to the GDP CAGR which at least according to official US sources rose at a 3.9% rate.
To talk about something as being “inchoate” means that it is still in its formative stages and is undeveloped. If rage is “inchoate”, it does not yet have a specific cause or those who feel the rage are not sure of the nature of what is causing the emotion. Like their compatriots all over the world, Americans know that what is coming out of their politicians and “financiers” is a load of malevolent hogwash, but they cannot put their finger on precisely why this is so. Many suspect the truth but do not want to face it because of what it implies about their own actions as well as the actions of their rulers.
One more domino in the dollar reserve supremacy regime falls. Following the announcement two weeks ago that "Australia And China will Enable Direct Currency Convertibility", which in turn was the culmination of two years of Yuan internationalization efforts as summarized by the following: "World's Second (China) And Third Largest (Japan) Economies To Bypass Dollar, Engage In Direct Currency Trade", "China, Russia Drop Dollar In Bilateral Trade", "China And Iran To Bypass Dollar, Plan Oil Barter System", "India and Japan sign new $15bn currency swap agreement", "Iran, Russia Replace Dollar With Rial, Ruble in Trade, Fars Says", "India Joins Asian Dollar Exclusion Zone, Will Transact With Iran In Rupees", and "The USD Trap Is Closing: Dollar Exclusion Zone Crosses The Pacific As Brazil Signs China Currency Swap", China has now launched yet another feeler to see what the apetite toward its currency is, this time in the heart of the Eurozone: Paris. According to China Daily, as reported by Reuters, "France intends to set up a currency swap line with China to make Paris a major offshore yuan trading hub in Europe, competing against London." As a reminder the BOE and the PBOC announced a currency swap line back in February, in effect linking up the CNY to the GBP. Now it is the EUR's turn.
Getting a second passport is just part of a larger "permanent traveler" strategy. The ideal is to live in one place, have your citizenship in another, your banks and brokers in other jurisdictions, and your business dealings in yet others. That makes it very inconvenient for any one government to control you. You don't want all your eggs in one basket – that just makes it easier for them to grab them all. I understand it may not be easy for most people to structure their affairs that way. That's exactly why most serfs stayed serfs; it was hard and scary to think of anything other than what they were told they should do.
There were many casualties following Friday's 4% gold rout, but none were hurt more than one-time hedge fund idol John Paulson, who according to estimates, lost more than $300 million of his own money in one day. Per Bloomberg: "Paulson has roughly $9.5 billion invested across his hedge funds, of which about 85 percent is invested in gold share classes. Gold dropped 4.1 percent today, shaving about $328 million from his net worth on this bet alone." This is merely the latest insult to what has otherwise been a 3 year-long injury for Paulson and his few remaining investors, whose very inappropriately named Advantage Plus is among the bottom 10 hedge funds for the third year in a row. Yet despite being a one-hit wonder thanks to one lucrative idea (long ABX CDS) generated by one of his former employees (Pelegrini), Paulson still has been lucky enough to somehow amass a $10 billion personal fortune which can have a $300 million downswing in one day, even if it is in an asset class which eventually will go only one way - up. Unless, of course, like so many other fly by night billionaires, Paulson too hasn't somehow managed to lever up all his equity into numerous other downstream ventures, and where a $300 million blow up leads to margin calls and other terminal liquidity outcomes.
The stock market is not crashing yet, but there are lots of other market crashes happening in the financial world right now. Just like we saw back in 2008, it is taking stocks a little bit of extra time to catch up with economic reality. But almost everywhere else you look, there are signs that a financial avalanche has begun.
In the past six years the Post Office has lost $41 BILLION and they have a cumulative deficit of $36 billion.
The Post Office will lose another $10 to $15 billion this fiscal year.
They have $15 billion of debt on their balance sheet, with $9.5 billion payable in the next 9 months.
$33.9 Billion of payments for pension and health benefits for retirees, all due within the next 5 years.
$25 billion for workers compensation and sick leave payments.
Back in 2012, amid "intense pressure from Obama" including an appeal for its passage in his 2012 State of the Union address, Congress passed the Stop Trading on Congressional Knowledge (STOCK) Act (with 96-3 theatrical votes in the Senate, and 417-2 even more theatrical votes in the House) - a bill prohibiting the use of non-public information for private profit, including insider trading by members of Congress and other government employees. It is unclear why until 2012 it was perfectly legal for congress to trade on inside information, something we pointed out in May 2011 when we wrote that a "A Hedge Fund Comprised Of Junior Congressional Democrats Should Outperform The Market By 9%" as it turned out flagrant insider trading abuse occurred mostly within the democrat ranks of the House (compared to a mere 2%+ outperformance by Congressional stock trading republicans). It turns out that any cynical skepticism regarding Congress' ability and willingness to police itself was well founded, as last night the House eliminated a "key requirement of the insider trading law for most federal employees, passing legislation exempting these workers, including congressional staff, from a rule scheduled to take effect next week that mandated online posting of financial transactions."
The idea of IRS agents poking through your email account might sound at the very least creepy, and maybe unconstitutional. But the IRS does have a legal leg to stand on: the Electronic Communications Privacy Act of 1986 allows government agencies to in many cases obtain emails older than 180 days without a warrant. In 1986 they decided this? Who used email in 1986? That’s why an internal 2009 IRS document claimed that “the government may obtain the contents of electronic communication that has been in storage for more than 180 days” without a warrant. Another 2009 file, the IRS Criminal Tax Division’s “Search Warrant Handbook,” showed that the division’s general counsel believed “the Fourth Amendment does not protect communications held in electronic storage, such as email messages stored on a server, because internet users do not have a reasonable expectation of privacy.”
Ever since Moody's head economist Mark Zandi, together with Princeton's Alan Blinder, authored a paper in July 2010 titled "How We Ended The Great Recession" (which incidentally is wrong on two key counts: i) it is a great depression not recession, and ii) it has not ended) it became clear that the Keynesian sycophant would not rest until he somehow found a way to penetrate deep inside one or more of the darkest administrative orifices of the Obama regime. Surely, Zandi must have been heartbroken when it was not him but Jack Lew picked to replace Tim Geithner - a post the Keynesian had a desperate craving for. Yet his recent appointment to head up the ADP "payroll" joint venture, which was nothing more than a test of his propaganda skills, should have given us advance notice something was cooking. Further notice should have emerged when the US Department of Injustice launched its rating agency witch-hunt campaign only against S&P, not Moody's, where the abovementioned Zandi still officially works. Last night all of this finally fell into place, when the WSJ reported that Zandi has emerged as the leading candidate to head the FHFA - the regulator in charge of the two zombiest of zombie US institutions: the still insolvent Fannie and Freddie, in the process kicking out current FHFA head Ed DeMarco who recently emerged as Obama's persona non grata number 1 for his stern refusal to espouse socialist practices and wholesale debt forgiveness and principal reduction.
While most argue that the Fed has its foot on the throat of the bond market - and thus they do not reflect 'economic reality', it is hard to argue with the following chart of 30 years of Fed-intervened rates markets and the consequent GDP growth. Hope remains high for 2013 and beyond yet as very recent macro data shows, things are not going quite according to the economists' linear extrapolations. Maybe bonds do know something after all?
Following up on last week's twelve WTF charts, we thought it might be appropriate to look at the current equity market's efficient discounting knowledge relative to eight historically correlated risk-asset markets. What do stocks know that these markets are 'inefficiently' believing in?
The investment environment is changing at a rate that's representative of global economic imbalances, fund flows, and geopolitical risks. We believe this decade will continue to witness greatly increased volatility and instability in the economies of the world and the global financial system. Very few past models are still valid (and most have been proved 'empirically' in real-time to be entirely fallacious). Such a situation has contributed to the extreme uncertainty that currently prevails. Our guiding principle is to help investors understand and navigate through all the complexities of an unstable, inflation-prone world. The following ten themes will be key drivers of financial market performance over the next 1 to 5 years.